Bill to Fine Big Firms with Workers on Medi-Cal Comes up Short

The California Assembly proposal, which is strongly opposed by business interests, fails to get the support needed in an initial vote.

A California proposal to fine large companies that have workers on Medi-Cal came up short in an initial vote in the Assembly amid strong business opposition.

The proposed fines could reach about $5,000 per full-time employee who receives Medi-Cal, the state Medicaid program for the poor.

The bill, AB 880, garnered 46 votes in the 80-member chamber Thursday, short of the 54 votes, or two-thirds majority, needed. The measure could come up for reconsideration as early as next week.

Democratic lawmakers, backed by unions, consumer groups and doctors, say this measure would address a loophole in the federal Affordable Care Act that encourages large retailers and restaurant chains to dump hourly workers onto the government dole because there’s currently no penalty for doing so.

For years, politicians and labor unions have criticized Wal-Mart Stores Inc. and other large employers for paying workers so little that many qualify for government insurance at taxpayers’ expense. Now critics fear the public will get hit with an even bigger bill as California and other states expand Medicaid as part of the federal healthcare law.

Assemblyman Jimmy Gomez (D-Echo Park) sponsored the measure, which he said was necessary to end this taxpayer subsidy for corporate giants.

Republican lawmakers, the California Retailers Assn. and other business groups say the proposal would cost the state much-needed jobs.

It’s estimated that an additional 130,000 workers from large firms will go on Medi-Cal in the next few years, part of nearly 1 million Californians overall who are expected to become eligible and enroll in the government program.

Already, about 250,000 people from bigger companies receive Medi-Cal, research from UC Berkeley and UCLA shows.

The proposed penalties could apply to as many as an estimated 1,800 companies in California that employ more than 500 workers each. Those firms would face fines based on 90% of the average cost of health insurance for every employee who is enrolled in Medi-Cal and works more than 12 hours a week.

The average annual premium for employee-only coverage was $5,615 in the U.S. last year, according to the Kaiser Family Foundation. The fines would be adjusted based on how many hours an employee works.

The federal health law imposes separate penalties if large employers don’t offer health insurance to employees who work more than 30 hours a week on average, or if workers buy subsidized coverage in government-run exchanges.

Wal-Mart has previously said its “wages and benefits meet or exceed those offered by most competitors.”